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Passive K1 real estate syndication loss to offset primary home capital gain

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  • Passive K1 real estate syndication loss to offset primary home capital gain

    I have a 60k capital gain from selling a primary home in 2021 that I lived in for 18 months (less than 2 years to get the tax free gain). I have around 100k in passive K1 real estate syndication losses from depreciation in 2021.

    Can I not offset the gain with the passive losses? I was not an active participant in the syndication. Both are passive. Turbo tax is generating a long term capital gain on the house sale, but I was expecting it to offset so I wouldn't owe anything on the house sale.

  • #2
    Passive losses do not offset personal income of any kind including capital gains.

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    • #3
      Agree with SR, naturally. Just to be sure - do you qualify for an exception and, if so, have you entered that correctly in TT to potentially reduce the taxable gain?
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        It's weird I agree that the IRS puts all these different types of income/gains/losses in different categories.

        So bad news that you can't use these losses against your home capital gain. The good news is that you can use losses from tax loss harvesting against it. Got any of those? One more good reason to do tax loss harvesting.
        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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        • #5
          Originally posted by The White Coat Investor View Post
          It's weird I agree that the IRS puts all these different types of income/gains/losses in different categories.

          So bad news that you can't use these losses against your home capital gain. The good news is that you can use losses from tax loss harvesting against it. Got any of those? One more good reason to do tax loss harvesting.
          IRS has many incentives for home ownership.
          Same for investments and earned income (debatable).
          About the only thing in common is it relates to real estate. Is that really weird?

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          • #6
            No exceptions for me unfortunately. It's an unforced error and a good lesson to not assume you know the rules as we could have easily stayed in it a few more months to get the tax free capital gain.

            We have done some tax loss harvesting but can only deduct 3k on that capital gain? Either way it's a good thought and better than nothing.

            I'm not an accountant but it is a bit weird to me that both are passive gains/losses and both are real estate but you can't offset them because one is on a K1 and one isn't.

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            • #7
              Originally posted by Whenthetequilarunsout View Post
              No exceptions for me unfortunately. It's an unforced error and a good lesson to not assume you know the rules as we could have easily stayed in it a few more months to get the tax free capital gain.

              We have done some tax loss harvesting but can only deduct 3k on that capital gain? Either way it's a good thought and better than nothing.

              I'm not an accountant but it is a bit weird to me that both are passive gains/losses and both are real estate but you can't offset them because one is on a K1 and one isn't.
              All $60k in capital gains can be offset with capital losses from tax loss harvesting.

              Only $3k in ordinary income can be offset annually with capital losses.

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